IP Finance 101
IP finance has come a long way since Thomas Edison received business financing on the back of his lightbulb patents to fund the company that became General Electric Co. This section of the report outlines the past, present, and future of intellectual property financial products. It explains the recent trend of IP insurance and how it has accelerated lenders’ interest in IP-backed loan products.
Our first article details the history of IP finance and shows how it has proliferated around the world, with different variations in the US, Europe and the Asia-Pacific region. We give examples of noteworthy initiatives and show how insurance and big data insights will help to facilitate wider use of IP finance soon.
Our second article delves into IP insurance covering patent litigation and IP-collateralised loans. It explains how insurance covers four categories: IP campaigns, portfolios, IP judgments and adverse judgments. Insurance cover can enable patent holders to attract investors, support a portfolio sale, finance a patent purchase, protect a verdict and hedge against potential liabilities.
IP lenders and insurance companies must rely upon the value of intellectual property to transact deals with IP holders. But our third article reveals some doubt as to whether IP valuations are reliable because experts who evaluate the same piece of IP often give vastly different estimates of its worth. However, the counterpoint is that IP makes excellent collateral because it is worth so much to the business that holds it, regardless of whether it holds value to others. Others add that artificial intelligence tools for patent analytics will revolutionise IP valuation work.
The collateralisation of intellectual property to obtain debt finance works differently for patents, trademarks and copyrights. Our fourth article explains the factors that lenders look for when judging whether these types of IP make good collateral for a loan. It also highlights the risk of these transactions and how lenders are mitigating the risk.